Generic Strategies

Strategic Business Planning for Commercial Producers
What Tools Are Available to

Generate Strategies?
Generating Alternative
Strategies from SWOT
SWOT analysis is a tool for helping assess the
current situation for the firm.
However, we need to be able to combine the
information in the SWOT analysis in a
meaningful way to generate alternative
strategies that we might pursue.
The TOWS matrix is a tool designed to match
external opportunities and threats with internal
strengths and weaknesses.
SWOT Analysis
Strengths Weaknesses
1. 1.
Internal 2. 2.
Environment 3. 3.
Opportunities Threats
1. 1.
External 2. 2.
Environment 3. 3.
TOWS Matrix
Technique used in strategy formulation for
combining
External analysis
Opportunities
Threats
Internal analysis
Strengths
Weaknesses
TOWS Matrix From External Analysis (EFAS)
From
Opportunities: Threats:
Internal Analysis
1. 1.
(IFAS)
2. 2.
3. 3.
Strengths: SO Strategies
ST Strategies
1. Use strengths to
Use strengths to
2. take advantage
avoid threats
3. of opportunities
WO Strategies
WT Strategies
Weaknesses: Take advantage of
Defensive strategies
1. opportunities by
to minimize
2. overcoming
weaknesses and
3. weaknesses
avoid threats
Source: Weihrich
Business-Level Strategy
What Is Business-Level
Strategy?
Strategy is an integrated and coordinated set of
commitments and actions designed to exploit
core competencies and gain a competitive
advantage.
Business-level strategy is an integrated and
coordinated set of commitments and actions
designed to provide value to customers and gain
a competitive advantage by exploiting core
competencies in specific, individual product
markets.
Strategic Position
Successful farms will answer a fundamental

question:
Where will my farm focus its
resources and its passion?
Strategic Position
Is the way a firm goes to market.
Is the fundamental way the firm creates value
for the customer.
Is the passion of the organization.
Drives the organizations resource investment
decisions.
Is built around the firms core competencies,
the firms primary skills and sources of
competitive advantage.
Positioning Options
Example of Possible Positions in an
Agricultural Production Firm
Low-cost, bulk commodity producer
Customer-oriented specialty products producer
Full-service, consumer-focused custom farming
operation
Efficient, partnership-focused contract animal feeder
Technology-focused, cutting-edge animal breeder
Customer Focus
Adding value for customers ultimately
determines a firms success.
But we need to know who the customers for
our product are, what those customers needs
are, and how to satisfy those customers needs.
Customer Focus
Who is about determining what segment of customers we will
serve.
Is it the broad market? Or a specific customer in our local marketplace?
What is about determining what the customer groups needs
are that our products and services can satisfy.
Is it organic GMO-free products? Is it consistent timely delivery of the
product over an entire year?
How is about exploiting our core competencies to implement
value-creating strategies to satisfy our customers needs.
How can we take advantage of what we do well to deliver our targeted
customers needs in a way that gives us a competitive advantage with
this set of customers?
Overall Strategic Orientation

Core Competency
Cost Coordination Differentiation
Low-Cost
Broad Coordination Differentiation
Leader
Market
Scope
Niche Customization
Strategic Orientation
Core Competency
Low-Cost
Broad
Leader
Market
Scope
Niche
Low-Cost Leader Strategy
PRICE = $10
PRICE = $8
PROFIT = $5
PROFIT = $6
COST = $5
COST = $2
INDUSTRY COST
AVERAGE LEADERSHIP
Low-Cost Leader Strategy

Actions are integrated and designed to produce or
deliver goods or services at the lowest cost, relative
to that of competitors, with features that are
acceptable to customers.
Firms seeking competitive advantage through this
business-level strategy often sell no-frills,
standardized goods and services to the industries
typical customers
Successful implementation requires a consistent focus
on driving costs lower, relative to competitors costs.
Characteristics of a
Low-Cost Leader
Usually make investments in efficient-scale
facilities
Maintain tight cost and overhead control
Usually minimize costs in areas such as service
offerings, labor force, and R&D
Minimizing costs in the labor force is NOT giving
away management and family labor
Typically have standardized processes, limited
variety, supply chain mentality, and a frugal
culture
The Value Chain for a Low Cost Strategy
Firm Infrastructure cost-effective management information
systems (MIS), few managerial layers, simplified planning practices.
Human Resources: consistent policies to reduce turnover,
intense focus on training employees to be efficient and multi-skilled.
Technology: Easy-to-use production technologies,
investment in technology that improves production efficiencies.
Procurement: procedures to find the lowest cost inputs, frequent

evaluation of suppliers performances.
Inbound Operations Outbound Marketing Service
Logistics Use of Logistics & Sales Efficient quality
Efficient Economies of Delivery Small, highly control to
systems scale. schedule that trained sales reduce buyer
to link reduces costs. force. complaints.
supplier Construction of
products efficient scale Selection of Products
with facilities. low-cost priced to
production carriers. generate
processes. sales volume.
Low-Cost Strategy and the Five Forces

Rivalry can sustain low prices better than
competitors
Power of buyers price pressure not likely to be
below that of next-most-efficient competitor
Power of suppliers better able to absorb price
increases than other competitors
Threat of new entrants ever improving efficiency
levels to create entry barriers
Substitutes has more flexibility to reduce prices to
thwart customers switching to substitutes
Low-Cost Leadership
Organization attempts to outperform
competitors by doing everything it can to
produce goods or services at a lower cost
than competitors
Emphasis is on operational efficiency
May be achieved through process
innovations
Results in above average returns
Examples of Low Cost Leadership
Southwest Airlines
Wal-Mart
Gateway Computers
Nucor Steel
Nissan
Cost Leadership
What are some things that can help us be

cost leaders in production agriculture?
Core Competency
Low-Cost
Broad Differentiation
Leader
Market
Scope
Niche
Differentiation
Organization attempts to create a product that is
perceived by customers as unique in some
important way
Emphasis is on strategic positioning
May be achieved through
Superior quality
Superior customer responsiveness
Superior innovation
Results in above average returns through premium
pricing
Differentiation
PRICE = $12
PRICE = $10
PROFIT = $6
PROFIT = $5
COST = $6
COST = $5
INDUSTRY DIFFERENTIATION
AVERAGE
Differentiation Strategy
Integrated set of actions is designed to produce or deliver
goods or services that customers perceive as being different in
ways that are important to them.
Firms following this business-level strategy rely on unique
features of their product or service to drive superior margins
to those of their competitors.
A firms product can be differentiated in an almost countless
number of ways, such as:
Unusual features
Responsive customer service
Rapid product innovation
Technological leadership
Perceived prestige and status
Different tastes
Characteristics of Differentiated Firms

Mental focus on the customers needs
Entrepreneurial business structure,
creativity, and innovation prized and
encouraged
Efforts spent communicating value to
customers
Efficiency important, but cost secondary
to delivering value to the customer
The Value Chain for a Differentiation
Strategy
Firm Infrastructure Highly developed MIS to capture
customer preferences, firm-wide focus on high-quality products.
Human Resources: Compensation encourages creativity,
subjective performance measures, superior training.
Technology: strong capability in basic research, investment in
technologies that allow for production of highly differentiated products.
Procurement: procedures to find the highest quality inputs, purchase of

highest quality replacement parts, strict standards for suppliers.
Inbound Operations Outbound Marketing Service
Logistics Consistent Logistics & Sales Extensive buyer
Superior production of Accurate and Extensive training to
handling toattractive responsive granting of assure max.
minimize products. order credit buying. value from
damage Rapid response processing. Product.
and to customers Extensive
improve production Rapid and personal
quality. timely relationships
demands.
deliveries. with buyers.
Differentiation Strategy and the 5

Forces
Rivalry creates customer loyalty that reduces price
sensitivity
Power of Buyers the uniqueness of the good or
service reduces number of suppliers and increases
switching costs
Power of Suppliers higher margins insulate the firm,
and price insensitivity by buyers allows the firm to pass on
price increases
Threat of New Entrants loyalty of customers and
need to invest in differentiating techniques reduces this
threat
Substitutes loyal customers and high switching costs
Examples of Differentiated
Companies
Nike
Harley-Davidson
Levi Jeans
Mercedes-Benz
John Deere
Differentiation Strategy
What are some activities that we can

focus on to differentiate ourselves in
the production agriculture
marketplace?
Core Competency
Low-Cost
Leader
Market
Scope
Niche
Coordination
Focus: playing the facilitator role linking
suppliers and customers
Competitive advantage based on innovative
relationships/linkages
Key strengths in ability to control without
ownership, identify market opportunities
Push for a more coordinated agriculture to
create a potential role for such organizations
Coordination
May add substantial value through re-
configuring the supply chain
Heavy focus on soft assets, information and
people, as opposed to hard assets, plant and
equipment
Real focus on building trust among channel
partners, developing incentive, and payment
mechanisms that keep partners engaged
Overall Strategic Orientation

Core Competency
Low-Cost
Leader
Market
Scope
Niche Customization
Customization
Focus: developing highly tailored
solutions to fit a specific set of customers
Deep relationships with the segment of
choice
Can be applied to differentiation, cost
minimization, coordination
Pursued by both large and small firms in
an increasingly fragmented market
Customization
Focus: solving problems/creating results
for chosen segments
Unparalleled tailoring of solutions
Support tailoring through range of
products and services consistent with
needs, seamless access to resources,
localized decision making
Customer wins/we win attitude
Summary
Successful farms of the new millennium will:
Thoroughly understand the dimensions of the
external environment
Not take the market environment as a given, and
will drive change through their own actions
Choose a strategic position that is consistent with
the marketplace and their own competencies
Deliver on the critical elements supporting that
strategic position
Exercise
Consider one of the business units on your
farm.
Who are the customers you are trying to serve
from this business unit?
What opportunities and threats exist for this
business unit?
What strengths and weaknesses do you have in
this business unit relative to your competitors?
Using the TOWS matrix, is there a set of low-
cost strategies you can pursue for this business
unit? What about differentiation strategies?
Strategic Business Planning for

Commercial Producers

Generic Strategies

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Generic Strategies

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Droits d'auteur :

Formats disponibles

Strategic Business Planning for Commercial Producers

What Tools Are Available to

TOWS Matrix From External Analysis (EFAS)

Successful farms will answer a fundamental

Overall Strategic Orientation

Low-Cost Leader Strategy

Low-Cost Leader Strategy

Procurement: procedures to find the lowest cost inputs, frequent

Low-Cost Strategy and the Five Forces

Examples of Low Cost Leadership

What are some things that can help us be

Characteristics of Differentiated Firms

Procurement: procedures to find the highest quality inputs, purchase of

Differentiation Strategy and the 5

What are some activities that we can

Overall Strategic Orientation

Strategic Business Planning for

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